ECJ C-677/21 (Fluvius Antwerpen) – Judgment – Unlawful use of energy is a supply of goods

On April 27, 2023, the ECJ issued the judgment in the case C-677/21 (Fluvius Antwerpen).

Context: Request for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EU – Taxable transactions – Taxable person – Illegal consumption of electricity – Charging by the competent distribution network operator for illegally consumed electricity – Concept of ‘economic activity’ – Concept of ‘other body governed by public law’ – Negligible scope of activities referred to in the third subparagraph of Article 13(1) of the VAT Directive

Article in the EU VAT Directive

Articles 9(1), 13(1) 14(1), 14(2)(a) of the EU VAT Directive 2006/112/EC.

Article 9 (Taxable person)
1. ‘Taxable person’ shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as ‘economic activity’. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.

Article 13 (Public bodies)
1. States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.
However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.
In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.

Article 14 (Taxable transaction – Supply fof goods)
1. ‘Supply of goods’ shall mean the transfer of the right to dispose of tangible property as owner.
2. In addition to the transaction referred to in paragraph 1, each of the following shall be regarded as a supply of goods:
(a) the transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation;

Facts

MX was summoned by the distribution network operator, Fluvius Antwerpen (‘Fluvius’), to pay the sum of EUR 813.41 (inclusive of VAT), together with default interest in the amount of EUR 4.80 as well as statutory interest from the time of the summons in respect of the consumption of electricity … for the period from 7 May 2017 to 7 August 2019.
That invoicing did not take place because MX was supplied with electricity by Fluvius pursuant the latter’s public service obligation under Article 5.2.3(1) of the Energiebesluit (Energy Decision). This provision stipulates that if a domestic customer’s contract is terminated by his or her energy supplier, for example for non-payment, and this customer does not enter into a new contract with another energy supplier, he or she will be supplied by the distribution network operator.
This invoicing took place because MX used electricity at the address at which he resides … without having concluded a contract for such use with a commercial energy supplier and without having had a contract previously terminated by a (different) commercial energy supplier at that address and, as a result, was supplied by Fluvius on the basis of the public service obligation. In other words, the invoicing took place after Fluvius had established, with the passage of time, that actual usage, referred to as unlawful usage. Based on a comparison between the meter reading at the start of the unlawful usage and the meter reading at the end of the unlawful usage, an amount of EUR 813.41, which included EUR 131.45 in VAT, was invoiced for the usage over that period.
Given the legal basis for the invoicing, namely the unlawful usage, the vrederechter (magistrate) asked Fluvius to take a position on the chargeability of VAT on the amount invoiced.

Questions

Must Article 2(1)(a), read in conjunction with Article 14(1) of Directive 2006/112/EC, ¹ be interpreted as meaning that the unlawful usage of energy is a supply of goods, being the transfer of the right to dispose of tangible property as owner?

If not, must Article 14(2)(a) of Directive 2006/112/EC be interpreted as meaning that the unlawful usage of energy is a supply of goods, being a transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation?

Must Article 9(1) of Directive 2006/112/EC be interpreted as meaning that, if Fluvius Antwerpen is entitled to compensation for unlawfully used energy, it is to be regarded as a taxable person since the unlawful usage is the result of an “economic activity” of Fluvius Antwerpen, namely the exploitation of tangible property for the purposes of obtaining income therefrom on a continuing basis?

If Article 9(1) of Directive 2006/112/EC must be interpreted as meaning that the unlawful usage of energy constitutes an economic activity, must the first paragraph of Article 13(1) of Directive 2006/112/EC then be interpreted as meaning that Fluvius Antwerpen is a public authority and, if so, must the third paragraph of Article 13(1) then be interpreted as meaning that the unlawful usage of energy is the result of an activity of Fluvius Antwerpen that is not carried out on such a small scale as to be negligible?

AG Opinion

1. Article 2(1)(a) read in conjunction with Article 14(1) of the VAT Directive must be interpreted as meaning that unlawful usage of energy is a supply of goods for consideration, if the remuneration that is payable pursuant to law is dependent on consumption.

2. Article 9(1) of the VAT Directive must be interpreted as meaning that, if a distribution network operator additionally supplies electricity, that can also be regarded as an economic activity on its part. That is the case if the supply, for example due to illegal electricity usage, constitutes a risk inherent in its economic activity as a distribution network operator.

3. Negligible activities within the meaning of the third subparagraph of Article 13(1) of the VAT Directive can only be present if the body governed by public law should not be regarded as a taxable person on the basis of other activities.

Decision

1. Article 2(1)(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2009/162/EU of 22 December 2009, read in conjunction with Article 14(1) of that directive,

2. Article 9(1) of Directive 2006/112, as amended by Directive 2009/162,

must be interpreted as meaning that the supply of electricity by a distribution network operator, even if involuntary and the result of unlawful conduct on the part of a third party, constitutes an economic activity of that operator inasmuch as it gives rise to a risk inherent in its activity as an electricity distribution network operator. Where that economic activity is carried out by a body governed by public law acting as a public authority, such an activity, referred to in Annex I to that directive, can be regarded as being carried out on such a small scale as to be negligible within the meaning of the third subparagraph of Article 13(1) of that directive only if it is of such minimal scale in space or time and, consequently, of such a slight economic impact that the distortions of competition likely to result are liable to be, if not nil, at the very least insignificant.

Summary